Granville Stuns the Market

By Edward E. Scharff

A "hole in one "for a flamboyant Wall Street tipster

Frenzy set in as soon as the opening bell rang last Wednesday morning at the New York Stock Exchange. Prices plunged as brokers carried out orders from their clients to sell out their accounts. By midday the Dow Jones industrial average had fallen 31 points, although it recovered slightly in the afternoon to close down 23.80 points on a volume of 92.9 million shares. It was the busiest session in the 188-year history of the exchange. The following day, the Dow Jones index sank another 15.19 points.

The pandemonium was not the result of an outbreak of war or the death of a President. It had been caused by Joseph E. Granville, 57, a self-promoting market theorist who lives in a suburb of Daytona Beach. Last Tuesday night Granville sent messages to some 3,000 clients urging them to sell their stocks. Like Babe Ruth pointing to the centerfield bleachers in the 1932 World Series and then slamming a home run to that precise spot, Granville predicted a big stock market tumble last week and then sat back and watched it happen.

The Granville messages sent shock waves through an always nervous investment world. Wealthy clients were summoned from their breakfasts in luxurious European hotels and from beaches in the Caribbean. In Manhattan, the wife of a Wall Street executive answered the telephone and heard a voice declare coolly: "I have an early warning for you." The cryptic message: "Sell everything. Market top has been reached. Go short on stocks having sharpest advances since April." A battery of 34 employees transmitted the news for more than eight hours, until the final message went out at 2:45 Wednesday morning.

The first effects of Granville's sell signal were felt in Europe, where markets were soon open because of the time difference with the U.S. East Coast. Prices of American stocks nosedived on London, Zurich and Paris exchanges. Even before the market opened in New York, the news of Granville's signal had spread along Wall Street. Said Newton Zinder, a first vice president at E.F. Hutton: "It was like Paul Revere's ride." As stocks tumbled, Granville proudly pronounced his feat "a hole in one, an ace."

Last week was the second time in less than a year that Granville appeared not only to have predicted a major market swing, but also perhaps to have set it off. Wall Street sages believe that last April 22, Granville singlehandedly whipped the Dow Jones index into a 31-point advance with a flash advisory to buy stocks.

The man who wields such influence over the stock market is a flamboyant showman who has become the Mick Jagger of investment. At some 200 speaking engagements a year, Granville peddles his advice amid a Barnum-like performance that includes ventriloquism, juggling and bikini-clad models.

Sometimes he dresses like Moses in order to deliver the Ten Commandments of investing. Subscribers pay $250 per year for the Granville Market Letter (circ. 13,000); the "early warning service" of telephone and telex messages costs another $500 a year.

Granville says that he reached the decision to send out the sell order last Tuesday afternoon. Sitting in his posh, stuccoed office in Holly Hill, Fla., he watched the Dow Jones briefly hit 1013.13 before closing the day at 1004.69, a four-year high. In his Jan. 3 newsletter, he had predicted that the market could easily go up another 50 points from its level of 963.99, but looking afresh at the indicators he follows, Granville decided that the top of this bull market had been reached. Says he: "It involved no decisions on my part. I was just following the theory, and once we had a closing-day high above 1000, I had to give the sell signal." As soon as the market closed, Granville turned to his son and partner Blanchard, 28, and said: "Get the staff together. We're going tonight with a sell signal."

Granville has been firing off stock market predictions since 1957, when he joined E.F. Hutton to write its daily market letter. After the brokerage house began heavily editing Granville's highly opinionated copy, he quit and started his own investment service. He emerged from the bear market of the early 1970s with a dubious record. During those years, he kept urging subscribers to buy stocks even though the market continued to sink. Granville conveniently likes to forget that period and says that he has called every major market swing for the past 6 1/2 years.

While stock market professionals are generally impressed by Granville's zealous following, most remain skeptical about his method and latest feat They complain that if a brokerage firm sent out a message similar to that of Granville, it would be charged by the Stock Exchange and the Securities and Exchange Commission with using "extravagant and inflammatory language." Snapped one broker last week: "Granville got $5 million worth of free publicity by shouting 'Fire!' in a crowded theater."

The biggest losers last week may have been those who acted quickly on Granville's advice. The crush of opening sell orders was so heavy that many of them could not be carried out until stocks had substantially declined. Lucky investors sold after the Granville shock had subsided and the market had bounced back slightly. --By Edward E. Scharff. Reported by John Tompkins/New York

With reporting by John Thompkins

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